Exela Technologies, Inc. Reports Fourth Quarter and Full Year 2017 Results; Achieves Full Year Guidance for Pro Forma Revenue and Adjusted EBITDA; Sets 2018 Revenue Guidance of 4%-6%, Above Previous Long-Term Guidance
Summary
As I look to the future we have numerous opportunities for growth, by leveraging our scale, experience and references in business process automation and in industry-specific and industry-agnostic enterprise software solutions.Our client list includes 60% of the Fortune® 100, along with many of the world’s largest retail chains, banks, law firms, healthcare insurance payers and providers and telecom companies.Exela TechnologiesCondensed Consolidated Balance Sheet (Unaudited)December 31,20172016Assets Current assetsCash and cash equivalents$ 39,000 $ 8,361 Restricted cash 42,489 25,892 Accounts receivable, net of allowance for doubtful accounts of $3,725 and $3,200, respectively 229,704 138,421 Inventories, net 11,922 11,195 Prepaid expenses and other current assets 24,596 12,202 Total current assets 347,711 196,071 Property, plant and equipment, net 132,908 81,600 Goodwill 747,325 373,291 Intangible assets, net 464,984 298,739 Deferred income tax assets 9,019 9,654 Other noncurrent assets 12,891 10,131 Total assets $1,714,838 $969,486 Liabilities and Stockholders’ Equity (Deficit)Liabilities Current LiabilitiesAccounts payable $ 81,263 $ 42,212 Related party payables 14,445 9,344 Income tax payable 3,612 1,031 Accrued liabilities 104,485 29,492 Accrued compensation and benefits 46,925 31,200 Customer deposits 31,656 18,729 Deferred revenue 12,709 17,235 Obligation for claim payment 42,489 25,892 Current portion of capital lease obligations 15,611 6,507 Current portion of long-term debt 20,565 55,833 Total current liabilities 373,760 237,475 Long-term debt, net of current maturities 1,276,094 983,502 Capital lease obligations, net of current maturities 25,958 18,439 Pension liability 25,496 28,712 Deferred income tax liabilities 5,362 26,223 Long-term income tax liability 3,470 3,063 Other long-term liabilities 14,704 11,973 Total liabilities 1,724,844 1,309,387 Commitments and Contingencies Stockholders equity (deficit) Common stock, par value of $0.0001 per share; 1,600,000,000 shares authorized; 150,578,451 shares issued and 150,529,151 shares outstanding at December 31, 2017 and 64,024,557 shares issued and outstanding at December 31, 2016 15 6 Preferred stock, par value of $0.0001 per share; 20,000,000 shares authorized; 6,194,233 shares issued and outstanding at December 31,2017 and no shares issued or outstanding at December 31, 2016 1 - Additional paid in capital 482,018 (57,395)Less: common stock held in treasury, at cost; 49,300 shares at December 31, 2017 and no shares at December 31, 2016 (249)- Equity based compensation 34,085 27,342 Accumulated deficit (514,628)(293,968)Accumulated other comprehensive loss:Foreign currency translation adjustment (194)(3,547)Unrealized pension actuarial losses, net of tax (11,054)(12,339)Total accumulated other comprehensive loss (11,248) (15,886) Total stockholders equity (deficit) (10,006) (339,901) Total liabilities and stockholders equity (deficit) $1,714,838 $969,486 Exela TechnologiesCondensed Consolidated Statements of Income (Loss) (Unaudited)Year ended December 31,201720162015 Revenue $ 1,152,324 $ 789,926 $ 805,232Cost of revenue (exclusive of depreciation and amortization) 829,143 519,121 559,846Selling, general and administrative expenses 220,955 130,437 120,691Depreciation and amortization 98,890 79,639 75,408Impairment of goodwill and other intangible assets 69,437 - -Related party expense 33,431 10,493 8,977 Operating income (loss) (99,532) 50,236 40,310 Other expense (income), net: Interest expense, net 128,489 109,414 108,779Loss on extinguishment of debt 35,512 - -Sundry expense, net 2,295 712 3,247Other income, net (1,297) - - Net loss before income taxes (264,531) (59,890) (71,716)Income tax (expense) benefit 60,246 11,787 26,812 Net loss (204,285) (48,103) (44,904)Dividend equivalent on Series A Preferred Stock related to beneficial conversion feature (16,375) - -Cumulative dividends for Series A Preferred Stock (2,489) - - Net loss attributable to common stockholders $ (223,149) $ (48,103) $ (44,904) Earnings per share: - - Basic and diluted $ (2.08) $ (0.75) $ (0.70) Exela TechnologiesCondensed Consolidated Statements of Cash Flows (Unaudited)Year ended December 31,201720162015Cash flows from operating activities Net loss $ (204,285) $ (48,103) $ (44,904)Adjustments to reconcile net lossDepreciation and amortization 98,890 79,639 75,408Fees paid in stock 23,875 - -HGM Contract Termination Fee paid in stock 10,000 - -Original issue discount and debt issuance cost amortization 12,280 13,684 12,974Loss on extinguishment of debt 35,512 - -Impairment of goodwill and other intangible assets 69,437 - -Provision (recovery) for doubtful accounts 500 756 1,105Deferred income tax benefit (66,723) (15,729) (27,177)Share-based compensation expense 6,743 7,086 8,122Foreign currency remeasurement 1,382 193 150Gain on sale of Meridian (588) - -Loss on sale of property, plant and equipment 987 2,245 632Fair value adjustment of swap derivative (1,297) - -Change in operating assets and liabilities, net of effect from acquisitionsAccounts receivable (4,832) 20,801 11,583Prepaid expenses and other assets 2,628 4,969 892Accounts payable and accrued liabilities 52,953 5,544 (28,644)Related party payables 4,907 (2,427) (2,703) Net cash provided by operating activities 42,369 68,658 7,438 Cash flows from investing activities Purchases of property, plant and equipment (14,440) (7,926) (10,669)Additions to internally developed software (7,843) (13,017) (3,279)Additions to outsourcing contract costs (10,992) (14,636) (7,882)Cash paid for TransCentra purchase option - - (12,810)Cash acquired in Transcentra acquisition - 3,351 -Proceeds from sale of Meridian 4,582 - -Cash acquired in Quinpario reverse merger 91 - -Cash paid in Novitex acquisition, net of cash received (423,428) - -Other acquisitions, net of cash received (369)Proceeds from sale of property, plant and equipment 25 626 208 Net cash used in investing activities (452,374) (31,602) (34,432) Cash flows from financing activities Change in bank overdraft (210) (1,331) 938Proceeds from issuance of stock 204,417 - -Cash received from Quinpario 27,031 - -Repurchases of common stock (249) - -Proceeds from financing obligations 3,116 5,429 5,554Contribution from shareholders 20,548 - -Proceeds from new credit facility 1,320,500 - -Retirement of previous credit facilities (1,055,736) - -Cash paid for debt issuance costs (39,837) - -Cash paid for equity issue costs (149) - -Borrowings from revolver and swing-line loan 72,600 53,700 157,400Repayments from revolver and swing line loan (72,500) (53,200) (108,800)Principal payments on long-term obligations (39,316) (47,853) (33,474) Net cash provided by (used in) financing activities 440,215 (43,255) 21,618Effect of exchange rates on cash 429 (2,059) (672) Net increase (decrease) in cash and cash equivalents 30,639 (8,258) (6,048)Cash and cash equivalents Beginning of period 8,361 16,619 22,667End of period $ 39,000 $ 8,361 $ 16,619 Supplemental cash flow data: Income tax payments, net of refunds received $ 5,711 $ 3,771 $ 1,784Interest paid 69,622 96,166 87,302 Noncash investing and financing activities: Assets acquired through capital lease arrangements 6,973 11,925 6,021Leasehold improvements funded by lessor 146 5,186 665Issuance of common stock as consideration for Novitex 244,800 - -Accrued capital expenditures 1,621 580 878Dividend equivalent on Series A Preferred Stock $ 16,375 $ - $ -Liability assumed of Quinpario 4,672 Exela TechnologiesSchedule 1: Pro Forma 2016 vs. 2017 Financial Performance ($ in millions) Pro Forma FY 2017Pro Forma FY 2016 % Change Revenue Information and Transaction Processing Solutions$1,131.0$983.3 15.0% Healthcare Solutions233.6247.6 -5.6% Legal and Loss Prevention Services91.6102.2 -10.4% Total Revenue1,456.31,333.1 9.2% Cost of revenue (exclusive of depreciation and amortization)1,079.9957.1Selling, general and administrative expenses (Incl related party)289.5190.8Depreciation and amortization119.5120.2Impairment of goodwill and other intangible assets 69.4 - Operating income (loss) (102.1)64.9Interest expense, net153.4157.3Loss / (Gain) on extinguishment of debt53.0(2.3)Sundry expense (income) & Other income, net1.1(1.6) Net loss before income taxes (309.6)(88.5)Income tax expense / (benefit)(67.2)(23.6) Net loss (242.4)(64.9)Depreciation and amortization119.5120.2Interest expense, net153.4157.3Income tax expense / (benefit)(67.2)(23.6) EBITDA(36.7)189.0 Impairment of goodwill and other intangible assets69.4 - (Gain) / loss on extinguishment of debt53.0(2.3)Transaction and integration costs99.03.3Optimization and restructuring expenses47.936.0Non-cash charges, oversight & management fees12.622.5 Adjusted EBITDA$245.2$248.5 16.8%18.6% Further Adjusted EBITDA$346.8$349.9 -0.9%% Margin23.8%26.2%Note: Pro Forma FY 2017 SG&A (Including related party) of $289.5 million includes non-routine transaction related expenses of $99.0 million.(1) Financial results for Pro Forma FY 2016 do not include contribution from the TransCentra acquisition for the first nine months of the year since the transaction was closed on September 28, 2016.As of July 12th, the existing debt structures at respective Exela entities have been replaced with a new capital structure consisting of $350 Million Term Loan and $1.0 Billion Senior Secured Notes.- Combined merger adjustments represent operating cost reductions primarily related to the implementation of strategic actions and initiatives related to the business combination completed on July 12, 2017.
